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POLI 354 (26)
Chapter 18

Power Money and Trade Chapter 18

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McGill University
Political Science
POLI 354
Mark Brawley

Prepared by Jesse Abner KuriChapter 18US and Britain wanted to reestablish international economic regime around liberal principles post WWII There was a wartime discussion in Bretton Woods New Hampshire in 1944 which aimed at constructing the postwar monetary system This discussion resulted in the creation of the IMF and International Bank for Reconstruction and Development aka World Bank IMF was established to assist countries with short term balance of payment problemThe World Bank was to provide aid in war recovery and for future economic developmentBoth institutions embodied support for liberal practicesBretton Woods had 3 goalsTo establish free capital flowsMake currencies convertible to goldCreate stable exchange rateThese new mechanisms drew lessons from 1930 where market forces created problems and governments needed to step in to manage international system All governments wanted to pursue Keynesian policies domesticallyThe US was worried about another recession therefore the economic nationalists wanted to make sure the government can use Keynesian policies to prop up demand if necessary Morgenthau and White agreed that any international monetary agreement should not bind the ability of the US to use Keynesian policiesThe White Plan vs Keynes PlanWhites plan envisioned a strong IMF that can advise government to pursue Keynesian full employment policies He believed that of all countries stimulated their economy at the same time and none engaged in competitive devaluation everything would work well The IMF would also have veto powers about any countrys decision to change interest rateKeynes wanted IMF that would provide credits to Britain so that she could rebuild her economy after the war Keynes also wanted any monetary regime to be constructed outside of the US influence He proposed for International Clearing Union that would serve as a clearing house for national currencies ICU would also
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